HOW CAN DEVELOPING COUNTRIES AVOID BEING SUED BY FOREIGN INVESTORS a LOOK AT INTERNATIONAL CENTRE FOR THE SETTLEMENT OF INVESTMENT DISPUTES REGIME AND CASE ANALYSIS

FOREIGN INVESTMENTS PROTECTION AND ICSID

Economic Development and Foreign Investment under investment

treaties a Role of foreign investment toward Economic development:

Economic development is a crucial focus for many developing countries, aiming to enhance the living standards of their populations This process involves utilizing various tools to stimulate investment, production, and consumption within these nations Relying solely on domestic capital investment is often insufficient until a country reaches a more advanced stage of development Therefore, attracting foreign private investments emerges as a more effective strategy, as it not only brings in necessary capital but also provides technical assistance and managerial expertise To encourage this foreign investment, many developing countries have implemented measures such as tax reductions and preferential investment conditions.

Investing in developing countries, particularly those with large populations and youthful markets, presents private firms with significant opportunities for high returns Since the early 1980s, global foreign direct investment (FDI) flows have surged, with developing nations capturing two-thirds of the increase in FDI worldwide during the late 1980s and 1990s.

Investing in a foreign country differs significantly from participating in a trade transaction, as trade usually involves a one-time exchange of goods and money, while foreign investment entails a long-term commitment and strategic decision-making.

16 Hellmuth Fuhrer, “The Role of Private Foreign Investment in Economic Development, OECD Observer, Special Issue (September 1966), p.40

17 See more at: Joy Cherian, Investment Contracts and Arbitration – The World Bank Convention On the Settlement of Investment Dispute, A.W Sijthoff International Publishing Company B.V, p.8

Investment in a host country establishes a long-term relationship between foreign investors and the local government, requiring adherence to local regulations In recent decades, many developing nations have altered their laws due to concerns that rising foreign investment poses a threat to their sovereignty These legislative changes can adversely affect foreign investors, sometimes resulting in the total loss of their invested capital Consequently, the foundation of investment treaties becomes crucial in providing a stable legal framework for foreign investment.

Since the 1960s, developed market economy countries have promoted bilateral and multilateral investment agreements to ensure the protection of international investments These treaties address the uncertain legal frameworks of newly independent states by providing standards of treatment and safeguarding against political risks, such as changes in domestic legislation or expropriation, through established procedural and substantial requirements.

The content of the investment treaties usually include provisions granting

“adequate compensation” if an investment is directly or indirectly

Expropriation laws ensure that investments are safeguarded through prohibitions on currency controls, guarantees of full protection and security, and the promise of fair and equitable treatment Crucially, investors have access to direct remedies in international tribunals, such as the International Centre for Settlement of Investment Disputes (ICSID), to address any violations of these rights.

19 Rudolf Dolzer and Christoph Schreuer, Principle of International Investment Law, Oxford University Press, New York, (2008) p.3

21 Bernardo M Cremades, Promoting and protecting international investments, International Arbitration Law Review 2000

I don't know!

Bilateral Investment Treaties (BITs) often define expropriation to include measures that are "tantamount" or "equivalent" to expropriation, as well as actions that significantly diminish the value of an investment In these situations, BITs empower investors to take legal action against the host government if its actions are perceived to substantially expropriate the firm's business.

Bilateral Investment Treaties (BITs) can enhance a country's appeal to foreign investors by acting as a commitment mechanism, particularly in nations with weak domestic property rights By explicitly committing to uphold the property rights of foreign investors, these treaties provide essential dispute resolution processes and compensation provisions in cases of expropriation, thereby safeguarding investment profitability Viewed from a broader perspective, BITs establish a framework that minimizes arbitrary actions by host countries, fostering good governance—a crucial element for economic growth and poverty reduction Additionally, BITs contribute to creating a stable investment environment, further attracting foreign capital.

Foreign investors in sectors like oil, gas, mining, and water often seek to ensure investment security by including a stabilization clause in their agreements This clause helps protect their interests and provides a stable regulatory environment throughout the duration of the investment.

The Bilateral Investment Treaties (BITs) between countries, such as Japan and Egypt, and France and Pakistan, emphasize the protection of investments against expropriation and nationalization Article V of the Japan-Egypt BIT defines expropriation broadly, including any measures that have effects equivalent to expropriation or nationalization Similarly, the France-Pakistan BIT articulates that any expropriation measures, whether direct or indirect, resulting in dispossession of an investment, are subject to scrutiny These provisions highlight the importance of safeguarding foreign investments from arbitrary state actions.

Mary Hallward-Driemeier's 2003 World Bank report, "Do Bilateral Investment Treaties Attract FDI? Only a bit…and they could bite," explores the nuanced impact of bilateral investment treaties (BITs) on foreign direct investment (FDI) The findings suggest that while BITs may have a limited positive effect on attracting FDI, they also carry potential risks for host countries The full report is available online for further insights into the complexities of BITs and their implications for investment strategies.

The increasing number of Bilateral Investment Treaties (BITs) highlights a key motivation for countries to sign these agreements: the concern that without offering comparable protections, they may struggle to remain competitive as investment destinations.

27 Rudolf Dolzer, The Impact of International Investment Treaties on Domestic Administrative Law,

Stabilization clauses in investment agreements with host governments are designed to mitigate non-commercial risks by maintaining the original terms and conditions of a project These clauses commit the host government to refrain from altering the regulatory framework governing the investment, except under specific circumstances Typically, they freeze the host country's legislation as of the contract's signing date, ensuring that any future legal changes do not apply to the agreement This approach allows investors to operate under the legal framework that was in place at the time of contract execution, providing a level of security against unforeseen regulatory shifts.

Investment Dispute settlement and the choice of ICSID arbitration

Foreign private investors face inherent risks when investing in countries with differing socio-economic ideologies and legal systems, as their expectations may be undermined by host governments over time In the event of a dispute, these investors often hesitate to engage with the host state's domestic courts due to concerns about political influence and potential bias among judges Consequently, foreign investors tend to prefer alternative dispute resolution mechanisms that offer greater neutrality and protection.

Stabilization clauses play a crucial role in international petroleum transactions, as highlighted by Margarita T.B Coale in her analysis published in the Denver Journal of International Law and Policy These clauses are essential for reducing political risks in developing countries, a topic explored by P Comeaux and N Kinsella in their work on bilateral investment treaties and investment insurance Furthermore, C Chatterjee critiques the perception of stabilization clauses in investment agreements, offering insights into their effectiveness G Verhoosel also contributes to the discourse surrounding these important legal instruments in international investment.

Foreign Direct Investment (FDI) often faces legal constraints that impact environmental policies, necessitating a careful balance between stability and the need for change The article discusses the implications of these constraints on international business law and highlights the importance of adapting legal frameworks to support sustainable investment practices Additionally, the freezing of laws applicable to long-term international contracts is examined, emphasizing the need for clarity and flexibility in legal agreements to foster a conducive environment for FDI.

(1991) 43; Bertrand Montembault, “The Stabilisation of State Contracts Using the Example of Oil Contracts – A Return of the Gods of Olympia”, RDAI/IBLJ (no.6, 2003), p.593

29 Peter Muchlinski, Multinational Enterprises and the Law (1999); Klaus Peter Berger,

“Renegotiation and Adaptation of International Investment Contract: The Role of Contract Drafters and Arbitrators”, Vanderbilt Journal of Transnational Law (2003)

30 A Maniruzzaman, Stabilization in Investment Contracts and Change of Rules by Host Countries: Tools for O & G Investors”, AIPN Project (2005-2006), p.8

When entering into a commercial agreement with a state government or entity, it is crucial to ensure that any potential disputes can be resolved outside of local courts Additionally, sovereign issuers are typically reluctant to accept the jurisdiction of another country's national courts.

International arbitration serves as a practical solution for resolving disputes arising from investment agreements, which typically include dispute settlement provisions These disputes can be submitted to international arbitration tribunals such as ICSID or UNCITRAL Notably, approximately 75% of bilateral investment treaties (BITs) designate ICSID as the preferred mechanism for investor-state disputes The following chapter will analyze the ICSID framework to determine its suitability for developing countries.

In this paper, the term "Investment Agreements" encompasses various types of agreements related to investment, including Bilateral Investment Treaties (BIT), Multilateral Agreement on Investment (MAI), International Investment Agreements (IIAs), and other specific agreements between a state and a private company.

ICSID AND ITS REGIME

World Bank and the establishment of ICSID

In the 1960s, investment flows from developed to developing countries stalled due to various factors, particularly insecurity as newly independent states sought to nationalize foreign properties to assert their sovereignty and economic self-determination Investors faced challenges in confronting sovereign states and lacked mechanisms to protect their rights This issue was addressed with the 1965 Convention on the Settlement of Investment Disputes between States and Nationals of Other States, initiated by the International Bank for Reconstruction and Development (IBRD), largely thanks to the efforts of Aron Broches, who later became the Secretary-General of the International Centre for Settlement of Investment Disputes established under the Convention.

The Convention marked a significant advancement by empowering private individuals and corporations, defined as "investors," to initiate legal actions against foreign states in international arbitral tribunals This development eliminated the previous requirement for investors to rely on their home governments to address their grievances at the inter-state level.

Diplomatic protection grants private individuals and corporations the right to directly sue foreign states, marking the first system established for this purpose.

36 Chris Maina Peter, Selected essays: World Bank, ICSID and other subjects of public and private international law by Aron Broches, Journal of International Banking Law, 1996 Publication Review

37 Redfern and Hunter, Law and Practice of International Commercial Arbitration, Sweet and Maxwell (2004), p.65

The International Centre for Settlement of Investment Disputes (ICSID) offers five key features: it allows foreign companies and individuals to sue their host states directly, restricts state immunity, applies international law to investor-host state relations, excludes the local remedies rule, and ensures that ICSID awards are enforceable in all member states Following the establishment of the ICSID Convention, treaty drafters from signatory states quickly recognized the benefits of utilizing this specialized forum for resolving disputes between states and investors They incorporated clauses that established state consent to arbitrate with investors, aligning with Professor Brierley’s concept of a diagonal clause This innovation enables investors to directly claim under treaties against the host state, a practice first adopted by Switzerland in its 1981 Bilateral Investment Treaty (BIT) with Sri Lanka and consistently implemented in subsequent treaties.

ICSID arbitration and its regime

The International Centre for Settlement of Investment Disputes (ICSID) is part of the World Bank Group, headquartered in Washington, DC While the ICSID does not directly conduct arbitration proceedings, it plays a crucial role in managing their initiation and ongoing processes.

In order for ICSID arbitration to be invoked, the following criteria must first be fulfilled 42 :

For ICSID arbitration to take place, both parties must provide written consent to submit their dispute This consent can pertain to either a current dispute or a specified category of future disputes.

40 See Liebeskind, “State-Investor Dispute Settlement Clause in Swiss Bilateral Investment Treaties”

41 Lucy Reed, Jan Paulson and Nigel Blackaby, Guide to ICSID Arbitration, Kluwer Law International

- Second, the dispute must be between a Contracting State and a national of another Contracting State

A legal dispute must arise directly from an investment, which, while not explicitly defined in the Convention, has been interpreted broadly by ICSID tribunals Additionally, it is essential that there is consent in writing regarding the investment.

Lucy Reed et al defined agreements to arbitrate at ICSID into 2 categories: Contractual ICSID arbitration and Non-Contractual ICSID arbitration 43

The Centre has introduced model clauses for both current and future disputes, which can be incorporated into investment contracts or established through separate arbitration agreements Additionally, consent can be documented in various formats, including exchanged letters, telefaxes, or other instruments.

ICSID accepts arbitrations that stem not only from a direct agreement between the investor and the host State but also from indirect consent to ICSID arbitration found in various agreements.

The host State's national investment legislation, referred to as the "offer to consent by the host State," comes into effect when a foreign investor accepts the State's arbitration offer by filing a claim with ICSID.

Bilateral Investment Treaties (BITs) often include a "fork in the road" provision, enabling the host State and the investor's home State to select a location for resolving their disputes.

The UK Model BIT, for instance, provided that any disputes between contracting States can be referred to the ICSID, the ICC or UNCITRAL; or

A multilateral investment treaty facilitates dispute resolution between the host State and the investor's home State, as seen in Article 1120 of NAFTA, which permits investors to submit claims to ICSID (including the Additional Facility) or UNCITRAL Similarly, Article 26 of the Energy Charter Treaty allows investors to choose between ICSID, UNCITRAL, or the Stockholm Chamber of Commerce for resolving disputes.

Article 25(2) of the Convention defines a "national of a Contracting State" as (a) any natural person holding the nationality of a Contracting State that is not the State party to the dispute, and (b) any juridical person possessing the nationality of a Contracting State other than the State party involved in the dispute.

For individuals seeking to qualify as investors under ICSID jurisdiction, their country of citizenship is crucial A juridical person must possess the nationality of a Contracting State, distinct from the host State, at the time of consenting to ICSID arbitration Notably, the ICSID Convention does not define "nationality," allowing for greater flexibility for the parties involved.

The definition of nationality can differ across investment treaties, with most Bilateral Investment Treaties (BITs) determining the nationality of individuals based on the domestic laws of the contracting states involved.

44 Article 25(2) ICSID Convention, Full text of the Convention is available at: http://icsid.worldbank.org/ICSID/ICSID/RulesMain.jsp

The UK Model Bilateral Investment Treaty (BIT) defines "nationals" as physical persons recognized as UK nationals under UK law, reflecting the principle of absolute state sovereignty in determining national criteria Some BITs may require additional conditions such as residence or domicile Challenges can arise in cases of dual nationality, where an individual is a national of two contracting states, as most BITs do not provide guidance on this issue A potential resolution involves assessing effective nationality based on the relevant rules of the contracting states or general principles of international law Furthermore, complications may occur if an individual changes nationality after making an investment that was originally protected under a treaty based on their former nationality.

Investment treaties typically extend protection to legal entities, including companies, with many Bilateral Investment Treaties (BITs) requiring only that the entity is incorporated under the laws of the contracting parties However, some treaties impose additional criteria, such as the necessity for the entity to have its registered seat and/or to actively conduct business within the relevant state.

46 E.g Art.1(3)(b) of the Germany – Israel BIT

47 E.g Art.1 of the Denmark – Indonesia BIT

The Canada-Venezuela Bilateral Investment Treaty (BIT) uniquely defines "investor" by excluding individuals who hold citizenship in both contracting states, as outlined in Article I(g) of the agreement.

In the case of Marvin Roy Feldmen Karpa v United Mexican States (ICSID Case No.ARB (AF)/99/1), the ICSID Tribunal addressed jurisdictional challenges under NAFTA involving a US citizen residing permanently in Mexico Mexico contested the Tribunal's jurisdiction on the grounds of dual nationality; however, the Tribunal dismissed this objection, emphasizing that under general international law, residence serves a secondary role compared to citizenship This decision was documented in (2001) 40 I.L.M 615.

51 This is particularly true of German BIT practice See, for instance, Art.1(4)(a) of the Germany – Guyana BIT

ICSID arbitrators and arbitral tribunal

The International Centre for Settlement of Investment Disputes (ICSID) has a Panel of Arbitrators, with each Contracting State nominating four members Currently, there are 144 member states, including the recent ratification by Serbia and Canada's signing of the ICSID Convention, alongside Bolivia's notice of denunciation However, only 101 countries have appointed arbitrators to the Panel, which is predominantly composed of arbitrators from developed nations.

The appointment of arbitrators will be determined by the parties' agreement, or if none exists, by the Chairman of the Administrative Council According to the Convention, the tribunal may be composed of a single arbitrator or an odd number of arbitrators.

In the context of economic development and foreign investment, it is crucial to understand the scope of new investment laws and international instruments, as discussed by Parra in "The Scope of New Investment Laws and International Instruments" (1996) Additionally, the UNCTAD's 1999 series on issues in international investment agreements further elaborates on the definitions and implications of these laws.

In the case of Fedax NV v The Republic of Venezuela, the arbitral tribunal determined that promissory notes issued by Venezuela, which were acquired by the claimant through endorsement from the original holder in the secondary market, qualify as an investment under the Netherlands-Venezuela Bilateral Investment Treaty (BIT) This decision highlights the tribunal's interpretation of investment definitions within international agreements.

1997, 5 ICSID Report 186 The definition contained in the applicable BIT was substantially the same as the one quoted above

62 Article 12 and 13 of the ICSID Convention

63 International Centre for Settlement of Investment Dispute, ICSID Annual Report (2007)

The list of arbitrators designated by the Chairman and Contracting States can be accessed at the ICSID website An ICSID arbitration officially begins only when the Secretary-General informs the parties that all arbitrators have accepted their appointments.

A fundamental principle of international commercial arbitration is the independence and impartiality of arbitrators However, a 2006 study by Clint Peinhardt et al revealed a significant disparity, with panel presidents from industrialized countries outnumbering those from developing nations by a ratio of 111 to 43 Additionally, about two-thirds of non-presidential arbitrators also hailed from developed countries This imbalance raises concerns within the ICSID regime, which will be explored in subsequent chapters.

ICSID awards and enforcement

ICSID awards are deemed final and binding as outlined in Article 53(1) of the Convention, which states that "the award shall be binding on the parties and shall not be subject to any appeal." The ICSID Convention does not allow for any grounds to refuse the recognition and enforcement of ICSID tribunal awards Instead, it mandates that the national courts of Contracting States must recognize and enforce these monetary awards immediately, treating them as if they were final judgments of the local courts in those States.

A dissatisfied party may seek interpretation, revision, or amendment of an ICSID arbitral tribunal's award Valid grounds for such an application include the tribunal exceeding its powers, significant deviations from essential procedural rules, and the failure to adequately articulate the reasoning behind the award.

65 Article 37 of the ICSID Convention

An application for annulment of an arbitration award leads to the formation of an ad hoc committee, essentially a new arbitral tribunal, tasked with reviewing the case Should the committee annul the award, either party has the option to submit the dispute to a new tribunal, which will then issue a new and final award.

Due to its scheme of final binding, ICSID has been considered as the self- contained delocalized enforcement system which distinguishes it from other international commercial arbitration regimes

The ICSID Convention's specific provisions for the recognition and enforcement of awards do not apply to Additional Facility awards, which should be treated like standard international commercial arbitration awards, such as those governed by ICC, the London Court of Arbitration, the American Arbitration Association, and UNCITRAL Consequently, Article 19 of the Arbitration Rules stipulates that Additional Facility arbitration must occur in countries that are signatories to the New York Convention to avoid potential enforcement vulnerabilities.

72 Ibid, r.55 If the original award has only been annulled in part, the new tribunal will not reconsider any portion of the award that has not been annulled: r.55(3)

CRITICISM ON ICSID DISPUTES SETTLEMENT

Is ICSID the best choice for developing countries?

ICSID arbitration is the preferred dispute resolution mechanism in numerous bilateral and multilateral investment treaties, with 236 out of 290 investment-related cases (62%) filed with ICSID Among these cases, 78% were initiated due to breaches of Bilateral Investment Treaties (BITs), 13% were related to NAFTA, and 6% pertained to the Energy Charter Treaty (ECT).

74 International Centre for Settlement of Investment Dispute, ICSID Annual Report (2007)

Australia declined to accept the ICSID as a dispute resolution mechanism in its BIT with the U.S., raising questions about its commitment to international arbitration Similarly, Bolivia's withdrawal from the Convention highlights concerns over the effectiveness of ICSID Ecuador's rejection of ICSID arbitration for future disputes in the oil, gas, and mining sectors, along with its intention to withdraw from specific BITs, reflects a growing skepticism towards international investment arbitration frameworks.

A recent study by IPS and Food & Water Watch highlights that the ICSID and related investment and free trade treaties empower multinational corporations significantly, effectively privatizing elements of the international legal system Historically, international disputes were settled through state-to-state mechanisms; however, as noted by University of Minnesota professor and former arbitration lawyer Susan Franck, multinational corporations now function as "private attorney generals."

76 The US – Australia BIT was signed in 2004 without choosing ICSID as investor-dispute settlement system

77 Refer to Introduction at p.7 for more information

78 Supra n.22 sue sovereign states directly for monetary compensation 79 Corporate power has become elevated to the height of sovereign state power

Unfortunately, some corporations have misused ICSID as a tool for coercion These powerful entities frequently collaborate with officials from their home countries and international financial institutions to exert pressure on governments, compelling them to settle their investor-state disputes.

- The Bush administration broke off free trade negotiations with Ecuador after U.S.-based Occidental Petroleum filed an ICSID claim related to the Ecuadorian government’s cancellation of a contract 80

- The IMF advised Ecuador in September 2006 to increase its accumulation of reserves to prepare for a possible ruling against the country in the $1 billion ICSID claim by Occidental Petroleum 81

The World Bank and IMF have postponed debt relief for The Gambia for several years due to an ongoing ICSID claim from Swiss company Alimenta This claim arose after the Gambian government seized property belonging to the global groundnut trader, citing allegations of money laundering.

The U.S Ambassador to Mexico reportedly threatened Mexico's Commerce Secretary and a state governor, warning that he would place Mexico on a blacklist to hinder foreign investments if certain conditions were not met.

79 Franck, Susan “The Legitimacy Crisis in Investment Treaty Arbitration: Privatizing International Law Through Inconsistent Decisions.” Fordham Law Review, March 2005, pp 1538

On May 17, 2006, the U.S Department of State announced the suspension of trade negotiations with Ecuador, as reported by Scott Miller in the International Information Programs This decision reflects a significant shift in diplomatic relations and trade policies between the two nations For further details, the full article is available online.

81 “Ecuador rejects IMF recommendation in Occidental Petroleum suit” International Herald Tribune, Americas, October 7, 2006.

The Gambia has not reversed the actions that led to a NAFTA investor lawsuit filed by U.S.-based Metalclad, as noted in the Jubilee Research and the Africa Research Bulletin from January 1, 2001.

Wealthy nations, including the United States, frequently leverage trade, aid, and debt to maintain control over less powerful countries The existing framework of extensive investor protections further enhances this influence, allowing corporations to file investor-state lawsuits as a tool for pressure against host governments A notable example is the Suez company Aguas Argentinas, which exemplifies how such legal actions can be utilized for leverage.

A $1.7 billion ICSID lawsuit is exerting pressure on the Argentine government to make concessions in the renegotiation of the Buenos Aires water system contract, potentially postponing the government's decision to terminate the contract by several years.

Despite ICSID's role in aiding LDCs to create treaties and laws that promote foreign investment, the question remains: is ICSID the optimal choice for LDCs as host states when disputes arise with foreign investors? This article will explore general ICSID case facts and analyze specific cases to provide insights into this issue.

Facts and statistics

While it may be premature to label Least Developed Countries (LDCs) as "victims" of Bilateral Investment Treaties (BIT) and the International Centre for Settlement of Investment Disputes (ICSID), statistics reveal a significant imbalance Of the 172 ICSID cases, a striking 86% of claimants hail from industrialized nations, with 36% originating from the United States, compared to a mere 13% from developing countries This data underscores the disproportionate representation of developed countries in ICSID claims, highlighting potential challenges faced by LDCs in the investment landscape.

In the chapter "Investment, Sovereignty, and the Environment: The Metalclad Case and NAFTA’s Chapter 11," Fernando Bejarano González explores the intersection of foreign investment, national sovereignty, and environmental concerns within the context of NAFTA The analysis highlights the implications of the Metalclad case, illustrating how international agreements can challenge local governance and environmental regulations This work contributes to the broader discourse on economic integration and the resistance movements that arise in response to globalization in Mexico.

84 See Annex 7 for more details about the Buenos Aires water system and the dispute

According to recent data, the ICSID arbitral tribunal has ruled in favor of investors in 36% of concluded cases, while an additional 34% of cases were resolved through out-of-court settlements that provided compensation to investors This highlights the significant outcomes for investors involved in ICSID proceedings.

“middle-income developing countries” was 74% while cases against G-8 Countries (all filed against the US) were 1.4% 89

Global corporations have effectively lobbied to establish a global infrastructure that safeguards their interests, leading to a surge in multilateral and bilateral trade agreements These agreements provide firms with enhanced protections against governmental actions that could impact their profitability To enforce these rights, corporations can utilize arbitration bodies linked to the World Bank, such as the International Centre for the Settlement of Investment Disputes, along with other international tribunals.

3.3 Criticisms on ICSID dispute settlement mechanism:

Currently, there are over 100 pending cases with total investor claims against governments exceeding $30 billion The Attorney General of Pakistan, Mr Khan, highlighted during a colloquium at the International Centre for Settlement of Investment Disputes that many Bilateral Investment Treaties (BITs) signed by Pakistan were treated as mere "photo-op" agreements He emphasized that the true significance of these treaties became apparent only when foreign investors started invoking their treaty rights through investor-state arbitrations against Pakistan Mr Khan remarked, “These are signed without any knowledge of their implications And when you are hit by the first investor-state arbitration, you realize what these words mean.”

91 Opening remarks by Roberto Danino Secretary General, ICSID, “Making the most of international agreements: a common agenda” Paris, December 12, 2005

Pakistan's Attorney General, Luke Eric Peterson, emphasizes the importance of thoroughly examining investment treaties to ensure they align with sustainable development goals The International Institute for Sustainable Development (IISD) advocates for reforming international investment governance, highlighting the critical role of foreign investment in addressing climate change, poverty alleviation, and infrastructure development IISD's Investment Treaty News provides essential insights for policymakers, fostering discussions on the reform of outdated investor-state dispute settlement systems to protect climate policies and local communities Engaging with stakeholders globally, IISD aims to promote fair and sustainable investment practices that benefit both people and the planet.

When Bolivian President Evo Morales assumed office in January 2006, he expressed concerns about the numerous bilateral investment treaties established by the previous administration In April 2006, he highlighted that these treaties allowed foreign investors to pursue legal actions through international tribunals, leaving him feeling uneasy about the implications for national sovereignty.

The situation escalated when international gas companies warned the government of potential lawsuits if it proceeded with campaign commitments to boost Bolivians' share of natural gas revenues.

Bolivia has, using the following arguments to support its decision to denounce the ICSID convention 95 :

(i) the ICSID was established to favour the interests of foreign investors over States;

(ii) ICSID tribunals misapply investment treaty obligations and expand protections such as that of fair and equitable treatment in favour of multinational corporations;

Certain arbitrators on ICSID tribunals, along with their law firms, concurrently represent other investors in similar disputes, which raises concerns about their ability to impartially interpret investment treaty provisions.

(iv) the confidentiality of arbitration hearings charged with resolving matters of public interest; and

(v) the lack of a substantive appeals mechanism for arbitration rulings, capable of ensuring consistent outcomes from one case to the next

93 Manson, Paul “Evo Morales; Padlocked in the Palace.” BBC News, April 5, 2006 http://www.bbc.co.uk/blogs/newsnight/2006/04/evo_morales_padlocked_in_the_p.html

94 Schneyer, Josh “Amid mixed signals, Bolivia’s new president offers some comfort to foreign firms.” Platts Oilgram News, January 24, 2006; Bridges, Tyler, “Country in Crisis,” Houston Chronicle, July 6, 2005

95 Cabrera, Fernando (2007), “Bolivia expounds on reasons for withdrawing from ICSID arbitration system”, Investment Treaty News, 27 May, International Institute for Sustainable Development Available at: http://www.iisd.org

Bolivia plans to revise its bilateral investment treaties, focusing on three key areas: defining investment, performance requirements, and dispute resolution The country aims to narrow the definition of investment to those that genuinely benefit its economy Additionally, Bolivia seeks to enhance its ability to impose domestic input requirements and establish rules for technology transfer In terms of dispute resolution, the government intends to restrict investor-State arbitrations to domestic courts instead of international forums like ICSID These changes will be pursued sequentially as existing treaties approach their expiration.

On December 13, 2002, Brazil withdrew from six bilateral investment treaties, citing concerns that these agreements granted foreign investors excessive rights that undermined national jurisdiction and societal interests Notably, despite negotiating multiple investment treaties in the mid-1990s, none were implemented due to apprehensions regarding their constitutional implications Brazil has consistently resisted providing foreign investors with greater rights than those available to domestic companies.

… Brazil remains wary of permitting investment disputes to go to international investor-state arbitration” 98

The investor-State dispute mechanism is facing criticism not only from developing countries but also within the United States Washington Governor Christine Gregoire has voiced her significant concerns regarding this mechanism in a letter to the U.S Trade Representative.

In a significant move, Argentina has initiated steps to disqualify a tribunal regarding its decision to admit prior rulings, as reported by Fernando Cabrera and Luke Eric Peterson in the Investment Treaty News on May 9, 2007 This action highlights the ongoing complexities and disputes within international investment frameworks, as examined by the International Institute for Sustainable Development For further details, visit [IISD](http://www.iisd.org).

97 Miguel Solanes and Andrei Jouravlev, Revisiting privatization, foreign investment, international arbitration, and water, United Nations Publication, November 2007, Chile

98 Luke Eric Peterson, “Brazil remains wary of international investment rules”, Investment Law and Policy Weekly News Bulletin, 1 June, International Institute for Sustainable Development (IISD)

(2003) Available at: http://www.iisd.org

Recent international trade agreements, such as the Central America Free Trade Agreement (CAFTA) and the Moroccan Free Trade Agreement, have raised concerns regarding their investor-State dispute provisions Critics argue that these mechanisms pose risks to public interest policies, including environmental protection, public health, and workers' rights Originally intended to protect investors from unlawful seizures, these provisions now allow foreign investors to challenge regulatory actions, even in the absence of discriminatory language Notably, the definition of property eligible for regulatory takings is broader than U.S law, encompassing "expectation of gain or profit" and "assumption of risk." This disparity enables foreign investors to seek compensation for mere significant reductions in property value, unlike domestic investors who must demonstrate substantial destruction As a result, there is a call to revise the investor-State dispute mechanism to ensure that foreign investors do not enjoy greater rights than their domestic counterparts.

It has been argued that corporations and wealthy private investors have used investor-state disputes to: 100

99 Gregoire, Christine, The Honorable Rob Portman (2005)

- attack environmental and other public interest regulations;

- punish governments for acting according to the will of their people; and

- guarantee profits despite shoddy performance

3.4 Some special features of investor-state disputes:

Criticism of investor-state disputes stems from their unique characteristics, which set them apart from commercial arbitrations Unlike commercial cases that focus solely on private interests, investor-state processes must balance private interests with public concerns This distinction highlights the complex nature of investor-state disputes, where various public interest issues come into play.

Some special features of investor-state disputes

Criticism of investor-state disputes stems from their unique characteristics, which differ significantly from commercial arbitrations Unlike commercial cases that focus solely on private interests, investor-state processes must balance private interests against public interests This complexity gives rise to various public interest concerns that must be considered.

Disputes frequently emerge in public service sectors, including drinking water supply, sanitation, oil and gas, mining, electricity, transport, waste disposal, and telecommunications These cases are best resolved within public judicial systems, as they require a careful balance of private and public welfare concerns Additionally, they often address critical public policy issues, such as environmental protection, public health regulations, fiscal responsibilities, and access to essential public services.

Investor-State arbitrations can contest regulatory measures implemented by States to safeguard public welfare, particularly when these measures impact the value of investments, either directly or indirectly These regulations may encompass laws related to human rights, health and safety, labor standards, or environmental protection.

- The threat of investor-State arbitration has an informal “chilling effect” on States adopting public welfare regulations in the first place

- In private commercial disputes the interests at stake are only those of the parties themselves Money is usually the issue Public goods are almost never involved

- Beside, the disputes often relate to the permanent sovereignty of states

101 See more at: Supra n.97; Supra n.30 at p.70 over natural resources and normally will relate to the UN Resolution on permanent sovereignty 102

This article explores ICSID cases involving investment treaties in developing countries to identify the reasons behind common criticisms and assess whether ICSID arbitral tribunals have adequately considered the unique aspects of investor-state disputes.

102 See more at Chapter 4, session 4.1 (a)

ICSID REGIMES AND THEIR DISADVANTAGES

Does ICSID take into account special features of investor – state dispute?

Investor-state disputes differ from typical commercial disputes due to unique factors such as the host state's permanent sovereignty over natural resources, public welfare, and human rights This section will explore key disadvantages faced by host states when utilizing the International Centre for Settlement of Investment Disputes (ICSID) as their dispute resolution mechanism, particularly concerning issues of state sovereignty.

The UN's Resolution on Permanent Sovereignty over Natural Resources emphasizes that nations have the right to control their natural wealth for national development and the well-being of their citizens It advocates for international cooperation aimed at fostering economic growth in developing countries, ensuring that such support respects their sovereignty The resolution also highlights that violations of these rights undermine the principles of the UN Charter and obstruct international cooperation and peace.

104 The General Assembly Resolution 1803 (XVII) of December 14,1962 – Article 1

NAFTA also states that countries will undertake their obligations in a manner

“consistent with environmental protection and conservation” 107

The ICSID tribunal's decision in the Metalclad case revealed a troubling disregard for the UN Resolution and NAFTA's environmental provisions, as no weight was given to the community's environmental concerns that led local officials to block the landfill The ruling set alarming precedents by equating the denial of a construction permit and the establishment of an ecological reserve with "expropriation" under NAFTA, while also expanding the definition of "expropriations" to encompass "incidental" impacts on property value This expansion allows for legitimate zoning actions by sub-national governments to be challenged under NAFTA, raising significant concerns among critics about the interference of Chapter 11 with state sovereignty, especially regarding environmental regulations Environmentalists, including Bejarano, have expressed that the Metalclad case poses serious threats to democracy and the sovereignty of municipal and state governance.

In CMS Gas Transmission 111 the State incurred liability irrespective of its motivation for taking the offending measures

One of the primary objections to the Multilateral Agreement on Investment (MAI) is its potential to undermine state sovereignty by restricting a government's ability to regulate investments and other activities within its borders This apprehension is evident in the eight proposals put forth regarding the agreement.

108 See Annex 1 for more details

Mary Bottari and Lori Wallach's analysis, "Nafta’s Threat To Sovereignty And Democracy," examines the implications of NAFTA Chapter 11 investor-state cases from 1994 to 2005, highlighting the challenges posed to national sovereignty and democratic processes The findings offer crucial lessons for the Central America Free Trade Agreement, emphasizing the need for careful consideration of investor-state dispute mechanisms in trade agreements.

111 See Annex 8 for more details

The Investment Agreement presented to the Ministerial Conference emphasized the importance of respecting the host government's authority to regulate investor activities Additionally, the agreement highlights the significance of social welfare in the context of investment proposals.

Critics argue that the arbitration system is unsuitable for resolving investor-state disputes, as it lacks the accountability and consistency found in public judicial systems Unlike judges, who must adhere to applicable laws and appellate court decisions, arbitration allows disputing parties greater control over the resolution process This absence of oversight raises concerns about the privatization of justice, as highlighted by scholar Susan D Franck, who notes that it effectively places the enforcement of public international law rights in the hands of private individuals and corporations.

Three reasons why the arbitration model is inappropriate for resolving investor-state disputes:

- These are not private commercial disputes, rather they involve broad public welfare issues

The majority of investor-state claims today involve companies that provide basic public services such as electricity or water, or companies that extract, process and transport vital natural resources

Pippa Read's article, "International Investment in the WTO: Prospects and Challenges in the Shadow of the MAI," published in 1999, explores the complexities of global investment within the framework of the World Trade Organization (WTO) The piece highlights the ongoing debate about whether to negotiate new investment agreements or continue studying existing frameworks, as discussed in a briefing note for the Third WTO Ministerial Conference in December.

113 “Business-to-Business Mediation/Arbitration vs Litigation.” National Arbitration Forum, January

The operations of companies in the oil, gas, and mining sectors are closely tied to public welfare, environmental concerns, and national security Given the significance of these issues, it is no longer suitable for disputes involving these industries to be settled through a privatized commercial arbitration system Instead, such cases should be addressed within public judicial systems, as they require a careful balance between private interests and public welfare, often touching on critical public policy matters like environmental regulation, public health, fiscal responsibilities, and access to essential services.

- The arbitration model lacks public accountability, transparency and citizen participation

The commercial arbitration system is unsuitable for resolving investor-state disputes due to its lack of public accountability, transparency, and citizen participation Designed to keep hearings away from public scrutiny, this system often prioritizes secrecy, as noted by law professor Edward Brunet, who highlights that parties may prefer arbitration to avoid negative publicity from public trials Additionally, opportunities for citizen groups to submit amicus briefs, attend hearings, or access court documents are extremely limited, further diminishing public involvement in the process.

- There is no separation between the role of judge and lawyer

In the public judicial system model, no practicing lawyer is permitted to be a member of the judiciary as well However, in the

115 “Latest Developments in Investor-State Dispute Settlement, IIA Monitor No 4.” UNCTAD, New York and Geneva, 2006, p 3.

117 Brunet, Edward, “The Core Values of Arbitration” Arbitration Law in America, Cambridge University Press, 2005.

In the arbitration system, the distinction between the roles of lawyers and arbitrators is minimal, as both can act as judges on arbitration panels or tribunals This dual role raises concerns about potential conflicts of interest.

The necessity defence which is widely accepted in international law are sometimes omitted by ICSID tribunals

Under customary international law, recognized by the International Law Commission, the necessity defense serves as an exception to illegality and, in some instances, to responsibility This principle permits governments to undertake actions during crises that could otherwise breach international obligations Additionally, Bilateral Investment Treaties (BITs) typically include provisions that empower host states to implement necessary measures to uphold public order, security, and the integrity and stability of their financial systems.

ICSID arbitral tribunals do not consistently accept exceptions related to necessity and national emergency as defenses against treaty violations For instance, in the CMS v Argentina case, the tribunal dismissed Argentina's necessity argument Conversely, in the LG&E v Argentina arbitration, Argentina was permitted to invoke a defense of necessity under Article 11 of the US-Argentina treaty during the peak months of its financial crisis, ultimately providing a valid excuse for its actions.

120 See more at Canadian BIT model, United State BIT model

121 See Annex 8 for more details

Argentina of any legal and financial liability for treaty breaches committed during that time-window 122 d Ignore human rights:

The intricate relationship between human rights and foreign investment law is widely acknowledged, with many experts agreeing that international investment law and arbitration negatively affect the promotion and protection of human rights Ryan Suda encapsulates his recent findings, highlighting these concerns.

Bilateral Investment Treaties (BITs) provide robust protections for investors from either state party operating in the territory of the other, but they may inadvertently hinder the enforcement and realization of human rights For instance, when a company causes significant pollution, it can infringe upon the rights to a home, privacy, and family life of local residents, as highlighted by the European Convention on Human Rights A pertinent case is López Ostra v Spain, where the European Court of Human Rights addressed the adverse effects of a privately operated waste treatment plant that polluted the environment and jeopardized the health of nearby residents The Court emphasized the state's positive obligation to safeguard the applicant's rights to her home and family life, ultimately ruling that the municipality failed to balance these rights with its interests in operating the waste facility, thereby violating the applicant's rights.

Why and how ICSID awards favored foreign investors?

In a few exceptional cases, host states have successfully triumphed over investors in legal disputes, as demonstrated in notable cases such as Vieira v Chile, Bayview Irrigation District et al v Mexico, MCI Power Group LC v Ecuador, and Fireman's Fund Insurance Company v The outcomes of these cases highlight the complexities and challenges faced by investors in international arbitration.

138 Lanco International, Inc v Argentine Republic, ICSID Case No ARB/97/6

140 Investment Treaty News, February 5, 2008, available online at: http://www.iisd.org/pdf/ 2007/itn_sep28 _2007.pdf ) [Assessed on September 1, 2008]

141 Vieira v Chile, ICSID Case No ARB/04/7 (Chile – Spain BIT)

142 Bayview Irrigation District et al v Mexico, ICSID Case No ARB(AF)/05/1 (NAFTA ) -Award,

Critics argue that the International Centre for Settlement of Investment Disputes (ICSID) primarily serves the interests of foreign investors at the expense of sovereign states In 2007 alone, Argentina faced five significant arbitration awards, totaling over $700 million, after being found in breach of various Bilateral Investment Treaties (BITs) with countries such as Germany, the United States, and France Notable cases included Siemens receiving $217.8 million, Enron Corporation and Ponderosa Assets LP being awarded $106.2 million, and Sempra being granted $128.6 million.

Why and how ICSID’s awards have been too favorable to foreign investors? Is there any reason for such decisions? a Question of World Bank’s regime?

Is the ICSID a disciplined or an independent child of the World Bank? 146 This question has been raised by many commentators

Since the 1980s, the World Bank's policies have faced significant controversy and opposition in developing countries, leading to growing skepticism about the legitimacy of the International Centre for Settlement of Investment Disputes (ICSID) as an independent entity This suspicion stems from ICSID's close administrative and philosophical ties to the Bretton Woods institution, prompting many to regard it as an extension of the World Bank.

“World Bank Tribunal” Several actors of the international civil society have

143 MCI Power Group LC and New Turbine, Inc v Republic of Ecuador, ICSID Case No ARB/03/6, Award, 31 July 2007

144 Fireman's Fund Insurance Company v United Mexican States, ICSID Case No ARB (AF)/02/1 (NAFTA)

145 Bolivia’s letter to ICSID Dated June 21, 2007 Available at: http://www.foodandwaterwatch.org/ water/world-water/right/icsid-letter [Assessed on August 17, 2008]

Julien Fouret, in his 2007 article "The World Bank and ICSID: Family or Incestuous Ties?" published in the International Organisation Law Review, argues that the International Centre for Settlement of Investment Disputes (ICSID) operates primarily as the judicial branch of the World Bank, exhibiting a bias toward the total liberalization of the global economy Critics contend that ICSID arbitral tribunals predominantly adjudicate cases involving poorer nations, which often struggle to meet the high standards of treatment and protection stipulated in investment contracts and Bilateral Investment Treaties (BITs) imposed by developed countries.

Julien Fouret contended that ICSID, being part of the World Bank group, tends to favor investors, particularly those involved in sectors recently privatized due to the Bank's encouragement He further emphasized that the ICSID website exemplifies this bias, highlighting the organization's historical context and its implications for investor relations.

is the first hint of a significant filial link between the two institutions” 150

Under Article 10 of the ICSID Convention, the Secretary-General is elected by the Administrative Council of the Bank upon the nomination of the Council Chairman, who is the World Bank President Notably, for the past 40 years since its inception, the Secretary-General of ICSID has also held the position of General Counsel at the World Bank.

The President of the World Bank serves as the ex officio Chairman of the ICSID Administrative Council, although he does not hold a voting position The Administrative Council, which governs ICSID, consists of one representative from each contracting state, and it convenes regularly to oversee the organization's activities.

147 Some lawyers have also affirmed that it is the “arm of the World Bank” M Kantor, “New Amendments to ICSID’s Arbitration Rules”, Stockholm International Arbitration Review (2006) 213, at 213

151 Recently, ICSID has its own full-time Secretary General

The Administrative Council of ICSID, which meets annually alongside the World Bank and International Monetary Fund meetings, holds equal voting power among its representatives Its key responsibilities include electing the Secretary-General and Deputy Secretary-General, establishing regulations and rules for ICSID proceedings, approving the budget, and reviewing the annual operational report Additionally, if parties in a dispute cannot agree on appointing conciliators or arbitrators, the chair of the Administrative Council has the authority to intervene and make the selections independently.

The relationship between the World Bank and the ICSID raises concerns among civil society groups, who argue that this connection undermines the credibility of the arbitration tribunal For the ICSID to be perceived as a trustworthy and impartial dispute resolution mechanism, it must maintain neutrality and objectivity, free from influences of the World Bank.

Critics have raised concerns about the relationship between the World Bank and the International Centre for Settlement of Investment Disputes (ICSID), highlighting a potential conflict of interest They argue that ICSID's administration of commercial disputes involving companies partially owned by the World Bank creates ethical dilemmas, especially since the World Bank has financed various private commercial projects Additionally, it has been suggested that the World Bank influences the development of bilateral investment treaties (BITs) among client governments For instance, during the 2006 BIT negotiations between the U.S and Pakistan, officials from the World Bank and the Asian Development Bank allegedly pressured Pakistan to conform to specific dispute resolution terms.

153 ICSID organization and structure, available at: http://icsid.worldbank.org/ICSID

The United States favors the ICSID mechanism over UNCITRAL as the preferred resolution method for arbitration, as highlighted in the Arbitration Review of The Americas 2008 For more details, visit http://www.globalarbitrationreview.com/handbooks/4/sections/8/chapters/49/venezuela (assessed on July 29, 2008).

In their study, Sarah et al argue that “the most important operational conflicts of interest between the World Bank Group and ICSID fall into five main categories:

Investors filing claims with the International Centre for Settlement of Investment Disputes (ICSID) often have ties to the World Bank, particularly through loans from its private sector arm, the International Finance Corporation (IFC) The IFC significantly promotes the ICSID mechanism as part of its loan agreements, highlighting its importance in facilitating investment dispute resolution.

Government respondents to the claims often find themselves as clients of the World Bank, frequently facing significant debt This relationship places them in a position of dependence on the World Bank, subjecting them to various lending conditions.

The World Bank frequently assists in crafting institutional, legal, and regulatory reforms that promote the privatization process It may engage directly or indirectly with host country governments to develop concession contracts with foreign investors involved in privatization These concession contracts can later lead to investment disputes.

- The World Bank’s IFC may also be a shareholder in companies that bring ICSID claims

- The investor may also have purchased guarantees from the World Bank’s Multilateral Investment Guarantee Agency (MIGA) MIGA provides political risk insurance for investors The guarantees aim to

The article by Ashfak Bokhari highlights the critical pitfalls associated with signing Bilateral Investment Treaties (BIT) with the United States It emphasizes the importance of these treaties in safeguarding investors against various risks, including currency transfer issues, expropriation, and breaches of contract Understanding these risks is essential for investors to make informed decisions.

SOLUTIONS FOR DEVELOPING COUNTRIES

Do developing countries need BITs to attract FDI?

The first BIT was ratified in 1959 Since then, the number of BITs has increased steadily through the 1980s In the 1990s, the number boomed In

1990 there were 470 treaties, by 2000 there were close to 2000 BITs (figure

Source: Mary Hallward-Driemeier, World Bank, DECRG, Do Bilateral Investment Treaties Attract FDI? Only a bit…and they could bite, June 2003

Historically, most treaties were established between wealthy OECD nations and developing countries However, following the fall of the Berlin Wall, numerous East European nations began ratifying treaties with both OECD members and developing countries In recent years, there has been a significant increase in Bilateral Investment Treaties (BITs) among developing nations By the year 2000, approximately 50% of all Foreign Direct Investment (FDI) flows from OECD countries to developing nations were protected under these BITs.

Source: Mary Hallward-Driemeier, World Bank, DECRG, Do Bilateral Investment Treaties Attract FDI? Only a bit…and they could bite, June 2003

Developing countries increasingly sign bilateral investment treaties (BITs) to enhance foreign direct investment (FDI) inflows Over recent decades, BITs have emerged as the primary international legal framework for fostering and regulating FDI The preambles of numerous BITs emphasize their goal of promoting FDI, reflecting their popularity among policymakers in developing nations.

Bilateral investment treaties (BITs) are seen by countries as a means to boost foreign direct investment (FDI), as they provide guarantees of certain standards of treatment for investors Many foreign investors express skepticism about the reliability of domestic institutions and legal enforcement in developing nations By signing BITs, developing countries willingly accept limitations on their sovereignty, hoping that these agreements will mitigate political and other risks, ultimately leading to an increase in FDI, which is the primary objective of these treaties.

The effectiveness of Bilateral Investment Treaties (BITs) in attracting Foreign Direct Investment (FDI) to developing countries remains unclear, as there is limited evidence to support their intended purpose Despite the growing number of BITs, questions persist regarding their actual impact on investment flows in these nations.

Hallward-Driemeier's study indicates that Bilateral Investment Treaties (BITs) are not essential for attracting Foreign Direct Investment (FDI) She highlights numerous source-host pairs with significant FDI despite the absence of BITs, such as Japan, which has only established four BITs, and the U.S., which lacks a BIT with its largest developing country partner, China Additionally, Brazil, a leading FDI recipient, has not ratified any BITs, while the U.S remains Vietnam's seventh-largest investor without a BIT in place Conversely, many countries with multiple BITs, like those in Sub-Saharan Africa, still struggle to attract substantial FDI despite efforts to enhance their investment environments.

191 Eric Neumayer and Laura Spess, Do Bilateral Investment Treaties Increase Foreign Direct Investment to Developing Countries? World Development Vol 33, No 10, pp 1567–1585, 2005

194 Investment Arbitration Reporter, Volume 1, No.4, July 1, 2008, available online at: www.iareporter.com have a BIT with either Canada or Mexico, its two biggest foreign investors

On the contrary, almost 60% of the countries it does have a BIT with actually have no foreign investment in Cuba 195

Recent international investment disputes have raised concerns about the financial implications for host governments, particularly regarding the potential size of awards and the limitations they impose on policymakers Critics argue that these disputes may incentivize companies to exploit treaty terms for profit, seeking compensation for previously unanticipated risks As apprehension about the unforeseen costs of Bilateral Investment Treaties (BITs) grows, it becomes crucial to assess whether these treaties are providing their intended benefits Policymakers must carefully balance the advantages against the potential drawbacks.

Ratifying new agreements can be challenging when the benefits are minimal, especially if the terms heavily favor investors While it is important to formalize relations and create treaties that address dynamic inconsistency issues, it is crucial to closely examine the terms of these agreements and the rights granted to investors.

A comprehensive analysis of two decades of bilateral foreign direct investment (FDI) flows from OECD countries to developing nations reveals minimal evidence that Bilateral Investment Treaties (BITs) have effectively increased investment levels Countries with weak domestic institutions, particularly in terms of property protection, have not experienced substantial gains from BITs, which do not serve as a replacement for necessary broader domestic reforms Instead, the findings suggest that investment growth is more likely in countries that prioritize strengthening their institutional frameworks.

Countries with robust domestic institutions are more likely to benefit from ratifying a treaty, as Bilateral Investment Treaties (BITs) serve as a complement rather than a substitute for these institutions Consequently, those who gain the most from BITs may actually be the least in need of them to demonstrate the quality of their property rights.

Elkins et al have same view that in concluding BITs, developing countries are

In his critique of Bilateral Investment Treaties (BITs), Vandevelde argues that these agreements compromise national sovereignty for the sake of international credibility He points out that BITs do not align with a genuinely liberal economic model, as they fail to prohibit government policies that distort the market, such as protective tariffs and tax incentives aimed at foreign investors Furthermore, he acknowledges that BITs significantly limit the capacity of host countries to regulate foreign investment effectively.

Eric Neumayer and Laura Spess have criticized Hallward-Driemeier’s study, arguing that it overlooks the signaling effect of Bilateral Investment Treaties (BITs) They contend that when a developing country signs a BIT, it not only commits to protecting foreign direct investment (FDI) from the developed signatory but also implicitly signals its intention to safeguard all foreign investments Consequently, signing a BIT is likely to generate positive spill-over effects, enhancing the overall investment climate.

Negotiations for Bilateral Investment Treaties (BITs) continue to take place between various countries For instance, in October 2008, Vietnam and the United States held their first session of talks to prepare for a BIT This treaty is expected to build upon the investment relations outlined in the existing Bilateral Trade Agreement between the two nations, focusing on key industry sectors.

200 Vandevelde, K (2000) The Economics of Bilateral Investment Treaties, Harvard International Law Journal, 41 (2), 469-502

202 Supra n.191 telecommunications, financial services, distribution, natural resources, audio visual products, and real estate 203

Developing countries that have already signed Bilateral Investment Treaties (BITs) with developed nations face the challenge of avoiding lawsuits from foreign investors at the International Centre for Settlement of Investment Disputes (ICSID) This article aims to explore potential strategies that these nations can adopt to mitigate the risk of litigation while engaging in international investment agreements.

Solutions for developing countries

a Negotiate and draft treaties carefully before signing:

To prevent unintended consequences from the interpretation of treaty provisions like the Most-Favored-Nation (MFN) clause and expropriation compensation clauses, careful drafting is essential It is crucial for treaties to specify whether actions taken by the host country prior to the agreement's effective date are considered violations A notable example of the ambiguity in treaty language is the Siemens A.G v Argentina case, where the tribunal determined that the terms “treatment” and “activities related to the investments” within the MFN clause of the Bilateral Investment Treaty (BIT) were broad enough to encompass dispute settlements.

The Canadian model BIT 206 offers a clear approach to addressing this issue by explicitly defining MFN clauses It excludes treatment provided under any bilateral or multilateral international agreements that were in force or signed before the treaty's entry into effect, ensuring clarity in its application.

The American Chamber of Commerce in Vietnam hosted a roundtable discussion on the VN-US Bilateral Investment Treaty in September 2008, in collaboration with the U.S Chamber of Commerce For further details, you can access the event information online.

205 ITA Monthly Report, available online at: http://www.kluwerarbitration.com/arbitration/ Newsletter.aspx ?monthember2004 Accessed on [August 15 th , 2008]

206 Available online at: http://ita.law.uvic.ca/documents/Canadian2004-FIPA-model-en.pdf

Developing countries often face challenges due to limited technical capacity and a lack of negotiation skills when engaging with developed nations To enhance their capabilities, it is crucial for these countries to seek consultancy services and technical assistance from specialists and experts in developed countries prior to entering into treaties.

Normally, many BITs are based on model BITs of capital exporting countries Therefore, developing countries should be very careful reviewing all the provisions before signing b Define investor and investment:

To prevent unexpected lawsuits at ICSID from minor shareholders or debtors, Bilateral Investment Treaties (BITs) must clearly define the terms "investor" and "investment." This necessity is underscored by cases like Lanco v Argentina, Fedax v Venezuela, and CSOB v The Slovak Republic, which highlight the potential for legal challenges Additionally, enhancing the capacity of domestic institutions is crucial for effective investment management and dispute resolution.

To achieve a balance between national policy objectives and investment protection, enhancing the role of domestic dispute settlement bodies is essential By establishing transparent, reliable, and objective local mechanisms, the urgency for international dispute resolution may diminish, potentially lowering overall dispute settlement costs through local solutions Therefore, it is crucial to develop and strengthen the capacity of local legislative, administrative, and judicial institutions.

208 See Annex 5 for more details

209 See Annex 6 for more details

210 Supra n.165 d Limit the investor’s access to arbitration:

Host countries can effectively manage foreign investment by restricting the areas where investors can settle at the International Centre for Settlement of Investment Disputes (ICSID) Some investment agreements include provisions that limit key treaty obligations and an investor's access to arbitration, benefiting host nations A notable example is the Encana v Ecuador arbitration, where the tribunal highlighted Article XII of the Canada-Ecuador treaty, which significantly narrowed the treaty's applicability in taxation disputes In February 2006, the tribunal dismissed Encana's $80 million claim, ruling that the denial of Value-Added Tax (VAT) refunds did not constitute a breach of the Canada-Ecuador investment treaty.

Due to the restrictive language of the treaty, the Canadian investor was required to seek resolution for its tax dispute in Ecuadorian courts Similarly, Bolivia has suggested in its proposed guidelines for a "fair and productive cooperation treaty with the United States" that investor-state disputes should be addressed through national legal mechanisms.

Developing countries voluntarily choose to enter into Bilateral Investment Treaties (BITs) that include dispute settlement provisions referencing the International Centre for Settlement of Investment Disputes (ICSID) It is somewhat patronizing to assume that these nations are signing treaties that ultimately disadvantage them.

In 2006, a significant number of investor-state disputes were initiated outside of ICSID, utilizing commercial arbitration venues like the ICC and SCC, as well as ad hoc procedures such as UNCITRAL rules This indicates that developing countries have alternative options beyond ICSID for resolving disputes with foreign investors.

211 See for example Article 12 of the U.S.-Azerbaijan BIT

213 “Bolivian Government Guidelines for a Fair Trade and Cooperation Treaty with the US”, available online at: http://www.art-us.org/bolivia_guidelines

215 Supra n.174 e Raise Human Rights Obligations

Alternatively, states can raise human rights obligations in their pleadings before arbitral tribunals to help them consider such points, as the UN High Commissioner for Human Rights encourages 216

Pippa Read emphasizes the importance of host countries collaborating with NGOs and international organizations to enhance awareness of human rights obligations among investors She critiques investment agreements for granting extensive rights and protections to investors while neglecting to impose corresponding responsibilities This criticism highlights a growing trend where NGOs seek to impose restrictions on international investment and globalization from the investors' home states Instead of allowing host countries to regulate international investors' conduct, these organizations argue that investors should be held accountable for their actions.

The concept of "higher morality" encompasses critical areas such as environmental protection, labor standards, and human rights, as articulated in emerging international law and the extraterritorial domestic laws of home states The author advocates for the establishment of a binding code of investor responsibilities, which would enable home states to enforce these higher moral standards on the foreign activities of their investors This approach aligns with the broader call for enhanced corporate social responsibility (CSR) in global business practices.

Numerous civil society organizations, development professionals, academics, southern governments, and legal experts have reached a consensus that the existing international investment law framework is ineffective and lacks fairness They argue that it does not offer a level playing field or impartial resolution mechanisms As a result, there is a growing call for the development of alternative rules that prioritize equity and justice in investment practices.

International investors have a responsibility to promote sustainable development while enhancing protections for the environment, labor, and human rights Additionally, individuals should have the right to sue investors for any violations of human rights, ensuring accountability and fostering a more equitable global trade environment For more insights, refer to Morton P's analysis on the challenges faced by the MAI, published in October 1998.

Todd Weiler advocates for the inclusion of provisions in future Bilateral Investment Treaties (BITs) that would permit nationals of the host state to initiate lawsuits against investors for alleged human rights violations He aims to enhance the current framework of international investment protection treaties by integrating a human rights claim mechanism, thereby acknowledging the increasing role of transnational corporations in human rights law while also addressing the critical issue of effective enforcement in human rights cases Additionally, he suggests that existing BITs should be renegotiated to incorporate these important changes.

For developing countries who already signed BITs, they should review the signed agreement and might call for revisions toward those treaties when possible

- Governments that share strong criticism of the current rules (e.g., Argentina, Ecuador and Bolivia) could negotiate new investment agreements with each other that serve as positive models

CONCLUSIONS

The current investor-state dispute settlement at ICSID has been criticized for granting excessive powers to foreign investors, allowing multinational corporations (MNCs) to leverage Bilateral Investment Treaties (BITs) as a form of insurance against risks typically inherent in business operations This arrangement can effectively provide MNCs with a property right over regulations that impact their profitability, ensuring that even if their investment decisions fail, they may still claim profits Increasingly, powerful firms have exploited these provisions to undermine democratic processes, often to the detriment of vulnerable communities and the environment.

While there is limited evidence supporting significant benefits from signing Bilateral Investment Treaties (BITs) for developing countries, policymakers must thoroughly assess and weigh the associated risks before entering into agreements that could perpetuate an imbalanced system.

Countries that have not ratified the ICSID Convention or signed any Bilateral Investment Treaties (BITs) referencing it must carefully evaluate the necessity of BITs for attracting foreign investors While there may be clear benefits to signing such agreements, developing nations should weigh the associated risks before agreeing to ICSID as the dispute settlement mechanism If the other party insists on ICSID, it is crucial for developing countries to negotiate and draft the treaty meticulously, ensuring that key issues such as investor and investment definitions, expropriation, and other critical aspects are clearly identified and defined.

Developing countries that have signed the ICSID Convention and included dispute settlement provisions in their Bilateral Investment Treaties (BITs) should thoroughly examine this paper and take proactive measures to protect their interests Recommended actions include renegotiating the existing BITs, considering withdrawal from the ICSID Convention, excluding ICSID provisions, and restricting investors' access to arbitration by limiting the types of disputes eligible for ICSID referral.

Developing countries that share concerns about the ICSID regimes can collaborate to advocate for reforms in the ICSID arbitration process They can propose to separate ICSID from the World Bank and work towards establishing a more equitable framework of investment rules.

The dispute arose over a hazardous waste disposal site in Guadalcazar, Mexico, where US investor Metalclad acquired land for a landfill Despite receiving assurances from the federal government regarding the necessary permits for the toxic waste facility, local authorities denied permission to commence construction due to environmental concerns.

Greenpeace-Mexico reported that state environmental officials had advised Metalclad against investing in a site deemed unsuitable for waste management due to unstable soils, which could allow toxic waste to seep into the subsoil and contaminate deeper water sources and seasonal surface streams Additionally, an environmental audit revealed a significant explosion risk stemming from inadequate containment of over 20,000 tons of toxic waste present at the location.

Despite receiving warnings, the company plans to accept 30,000 tons of toxic waste each year for the next 25 years In opposition, various municipal administrations have communicated their concerns to state and federal authorities regarding the reopening of the dump Local residents have staged protests against a public "grand opening" of the site, with support from Greenpeace and other national and local organizations.

231 Metalclad Corp v the United Mexican States, ICSID Case No.ARB (AF)/97/2, Award (August 30,

232 Andrew Wheat, “Toxic Shock in a Mexican Village,” Multinational Monitor, Vol 16 No 10, Oct

234 Ibid environmental and social organizations formed an alliance to demand that the site be cleaned up and then remain closed

In 1994, the local municipality halted Metalclad's construction of a toxic waste facility due to a lack of a municipal construction permit Despite applying for the permit, Metalclad proceeded with construction, completing the project in March 1995 without the necessary approval Local opposition and public demonstrations prevented the company from opening the site After years of conflict, a 1997 state decree designated the area as a natural reserve for endangered cacti, ultimately blocking the project.

Metalclad successfully argued before an ICSID tribunal that Mexico had violated NAFTA protections of fair treatment and against “expropriation and wins 15.6 million compensation

The arbitral tribunal ruled that the denial of the construction permit and the creation of an ecological reserve are tantamount to an “indirect” expropriation

The actions of the host government significantly hindered Metalclad's ability to utilize its property as intended, leading to claims of expropriation Additionally, the implementation of the Ecological Decree effectively prohibited the operation of the landfill, further solidifying the argument for expropriation.

In the arbitration case between Metalclad Corporation and the United Mexican States under Chapter 11 of NAFTA, the petitioner outlines their argument regarding the legal proceedings The case, numbered ARB(AF)/97/1, was presented in the Supreme Court of British Columbia on January 22, 2001.

In the case of Metalclad Corporation v the United Mexican States, decided by the Arbitral Tribunal under Chapter 11 of the North American Free Trade Agreement, the tribunal issued an award on August 25, 2000, highlighting key issues related to investment disputes This landmark decision, recorded by the International Centre for Settlement of Investment Disputes (Additional Facility), emphasizes the importance of protecting foreign investments and the obligations of states under international agreements.

Moreover, the tribunal ruled that Mexico violated the minimum standard of treatment guaranteed foreign investors because the firm was not granted a

The regulatory framework was described as "clear and predictable," yet ambiguity remained regarding the necessity of a municipal construction permit Federal authorities had assured Metalclad that the permits previously acquired by the former owner were adequate for the landfill's construction and operation Consequently, the municipality's refusal to issue a construction permit was deemed improper, as it was allegedly founded on perceived construction flaws.

CZECH REPUBLIC (CME)

On February 6, 1996, TECMED - a Spain firm - acquired through a bid procedure the land, buildings and other assets to operate a hazardous waste

239 Carolyn B Lamm, Eckhard R Hellbeck, Chiara Giorgetti, The new frontier of investor-state arbitration: annulment of NAFTA awards, International Arbitration Law Review, 2008

240 CME Czech Republic B.V v Czech Republic (2003) Available at www.investmentclaims.com - See Annex 2 for more details

241 Peter D Cameron, Stabilisation in Investment Contracts and Changes of Rules in Host Countries: Tools for Oil & Gas Investors, Association of International Petroleum Negotiators (AIPN), FINAL REPORT 5 July 2006

242 Supra n.186 landfill in Hermosillo, Sonora, Mexico

The renewal of the landfill operation license was denied due to various reasons, following significant local protests regarding environmental and health issues.

TECMED brought a claim pursuant to the bilateral investment treaty for alleged violations by Mexico of the treaty provisions regarding expropriation, fair and equitable treatment and full protection and security

The ICSID arbitral tribunal determined that a Mexican agency's refusal to renew a landfill operating permit amounted to expropriation, violating the Bilateral Investment Treaty (BIT) between Spain and Mexico.

The conduct of Mexican public officials was deemed inconsistent and lacking transparency, violating the principle of fair and equitable treatment for foreign investors The tribunal emphasized that this principle entails good faith conduct, requiring host countries to engage in consistent, transparent, and unambiguous interactions Foreign investors anticipate that host states will provide clear and stable regulations governing their investments, along with transparent policy goals and administrative practices, enabling them to plan effectively and comply with relevant regulations Consistency is crucial, as investors expect the host state to refrain from arbitrary actions, such as revoking agreements unexpectedly.

Técnicas Medioambientales Tecmed S.A filed a case against the United Mexican States, documented as ICSID Case No ARB(AF)/00/2, on May 29, 2003 The official ruling can be accessed in both Spanish and unofficial English translations through the International Centre for Settlement of Investment Disputes (ICSID) website.

In the case of ADF Group Inc v United States of America (ICSID Case No ARB(AF)/00/1), finalized on January 9, 2003, it was established that investors rely on pre-existing decisions or permits issued by the State to make informed commitments and effectively plan and initiate their commercial activities.

Mexico claimed that certain actions occurred before the treaty's implementation; however, the Tribunal disagreed Upon reviewing Mexico's actions both prior to and following the treaty's enforcement, it concluded that Mexico had violated its obligations under the Bilateral Investment Treaty (BIT).

The Tribunal ruled that the host government's environmental concerns and potential civil unrest from public protests did not justify the expropriation of the claimant's investment Consequently, Mexico was ordered to compensate the claimant with U.S $5.5 million for the diminished value of the investment.

Generation Ukraine v Ukraine 247 (Generation Ukraine)

Shortly after the Tecmed decision, another BIT Tribunal considered a claim impugning acts both before and after the treaty came into force In 1993 the

Generation Ukraine, a US company, received approval to construct an office building in Kyiv, but local authorities hindered the project's development, resulting in no construction by 2000 The company sought compensation from Ukraine under the US-Ukraine Bilateral Investment Treaty (BIT), alleging that Ukraine violated its treaty obligations by gradually expropriating the investment through a series of actions from 1993 until at least the end of 1997.

The US-Ukraine treaty had only come into force on 16 November 1996, more

The Generation Ukraine Tribunal determined that there was no expropriation by focusing solely on events that occurred after the Bilateral Investment Treaty (BIT) came into force, despite the allegations of expropriation beginning more than three years prior This approach contrasts with the Tecmed case, where the tribunal considered actions that straddled the treaty's effective date.

The dispute involved promissory notes issued by the Republic of Venezuela, which were acquired by Fedax, a corporation based in the Netherlands, through endorsement Fedax initiated a claim before ICSID after Venezuela suspended payments of capital and interest, violating the terms and conditions of the promissory notes.

Venezuela contended that the promissory notes should not be classified as investments, as they lacked a long-term transfer of financial resources or capital flow between nations.

In 1997, the tribunal determined that transnational loans and credit facilities fall under the jurisdiction of ICSID It recognized that financial transactions can straddle the line between legitimate investments and swift commercial dealings, ultimately affirming its jurisdiction in these matters.

"… loans qualify as an investment within ICSID'S jurisdiction, as does, in given circumstances, the purchase of bonds." 252

70

In the 1999 case of CSOB v The Slovak Republic, the tribunal established that the concept of investment should be interpreted broadly The loan provided by CSOB was deemed an investment as it was part of a series of financial transactions aimed at facilitating the privatization of CSOB and its subsequent operations in the Slovak Republic following its separation from the Czech Republic CSOB assigned its non-performing loan portfolio receivables to a collection company and also extended a loan to enable this company to purchase the receivables The tribunal highlighted that if a financial transaction, such as the loan from CSOB, is integral to a broader operation that qualifies as an investment, jurisdiction exists, even if the transaction alone would not meet the criteria for investment.

Azurix has committed to pay Argentina $438 million for a 30-year exclusive contract to deliver water and sanitation services in Buenos Aires Province However, the partnership faced challenges early on, as government officials denied the company's requests to increase water rates to their desired levels.

255 Azurix Corp v Argentine Republic, Award, ICSID Case No ARB/01/1, 14 July 2006

In April 2000, a significant controversy arose when an algae outbreak prompted provincial officials to advise residents against drinking local water and to limit exposure to showers and baths due to toxic bacteria in the water supply This warning led some customers to withhold payment for water services, especially after the government reportedly failed to fulfill promises regarding infrastructure improvements.

Azurix attributed the situation to Argentine government officials, citing years of disinvestment as the root cause In October 2001, following Enron's announcement to dismantle Azurix and sell its assets, the company terminated its contract in Argentina They accused the provincial government of "serious breaches" and subsequently filed a compensation claim with the International Centre for Settlement of Investment Disputes (ICSID).

Azurix claimed for $550 million in compensation, alleging violations of the expropriation, fair and equitable treatment and security and protection provisions of the U.S.-Argentina BIT

The Tribunal concluded that ‘ considered together, these actions reflect a pervasive conduct of the Province in breach of the standard of fair and equitable treatment.’

Argentina emphasized that its regulatory measures aimed to protect vital public interests, particularly ensuring citizens have access to essential services like clean, safe, and affordable water The Argentine government made a clear distinction between what constitutes "legitimate regulation" and "confiscatory regulation."

256 “Azurix wins claim against Argentina, recoups portion of its sunk costs.” International Institute for Sustainable Development Investment Treaty News (ITN), July 26, 2006 www.iisd.org/investment/itn

The ICSID tribunal determined that the key consideration is not merely the legitimacy and public purpose of the measure in question, but rather whether such a legitimate measure, despite serving a public purpose, warrants a compensation claim.

- That Argentina breached the U.S.-Argentina BIT by failing to accord fair and equitable treatment to Azurix’s investment

- That Argentina failed to accord full protection and security to Azurix’s investment under the BIT

- That Argentina breached the BIT by taking arbitrary measures that impaired Azurix’s use and enjoyment of its investment

- To award compensation to Azurix on account of the fair market value of the Concession in the amount of US$165,240,753.

CMS Gas Transmission Company v Argentina (CMS) 257

The CMS Gas Transition Company (“CMS”) purchased 29% shares of an Argentine company, Transportadora de Gas del Norte (“TGN”), pursuant to Argentina’s privatisation program in 1995

In early 2002, amid a worsening financial crisis, Argentine authorities froze gas transportation tariffs and mandated the conversion of private service contracts from dollars to devalued pesos at a one-to-one exchange rate The government also abolished periodic price and tariff adjustments based on foreign inflation indices, a practice previously outlined in numerous utility contracts These measures were criticized by CMS for their impact on the market.

257 CMS Gas Transmission Company and the Argentine Republic, ICSID Case No ARB/01/8, Award, May 12, 2005

The article by Goh Chien Yen discusses the implications of international investment agreements, particularly focusing on expropriation and dispute resolution mechanisms It highlights how a series of Peso devaluations negatively impacted investment profitability, leading to claims of regulatory takings This situation ultimately resulted in the case being submitted to the International Centre for Settlement of Investment Disputes (ICSID).

Argentina contended that its actions during the financial crisis were justified by a state of emergency or necessity, which should exempt it from liability under the U.S.-Argentina bilateral investment treaty Customary international law acknowledges the "necessity defense," permitting governments to act in crises even if such actions may breach international commitments Argentina emphasized that national public services, particularly gas transportation and distribution, must prioritize significant social needs.

Argentina contended that the International Centre for Settlement of Investment Disputes (ICSID) lacked jurisdiction over CMS's claim, asserting that CMS, as a minority non-controlling shareholder, did not possess the standing to seek damages incurred by TGN.

The CMS tribunal rejected Argentina’s arguments regarding necessity and national emergency as a defense to Treaty violations and awarded CMS U.S.$

The tribunal determined that Argentina's financial crisis did not meet the criteria for the necessity defense, leading to the conclusion that Argentina violated its obligation for fair and equitable treatment under the bilateral investment treaty Additionally, the tribunal recognized a breach of the umbrella clause, resulting in a total liability of 133 million plus interest.

259 Carlos E Alfaro, Argentina: ICSID Arbitration and BITs Challenged by the Argentine Government, December 21, 2004, available at http://www.mondaq.com/article.asp?articleid0151&searchresults=1

260 Katia Yannaca, Working Papers On International Investment, Improving The System Of Investor- State Dispute Settlement: An Overview, OECD, February 2006

Roberto Daủino discusses the role of ICSID as a platform for resolving international legal disputes through arbitration and conciliation He emphasizes Argentina's obligation to honor its commitments concerning investments, highlighting the importance of upholding international agreements in the context of investment disputes.

The tribunal dismissed the investor's claim of having experienced an "indirect" or "regulatory" expropriation, concluding that the investor's enjoyment of the property remained intact It emphasized that the investor's ongoing ownership and control of the investment indicated that no expropriation had occurred.

The Tribunal determined that Argentina's second argument was unfounded, stating that the Convention does not necessitate control over a locally-incorporated company for qualification Additionally, it clarified that a minority non-controlling shareholder can bring a claim under the Convention, emphasizing that the focus is not on majority ownership or control, but rather on the ability of shareholders to assert claims independently of the corporate entity.

Argentina applied to the ICSID in an effort to annul the award 265 The committee has annulled the portion of the 2005 award relating to the so-called umbrella clause.

In the LG&E v Argentina case, an ICSID tribunal ruled that Argentina's actions in response to the financial crisis were justified by state necessity, marking a significant departure from previous conclusions.

265 Hearings in that case were held in May of 2007, and a final decision was rendered by an ad hoc committee in September

266 LG&E Energy Corp., LG&E Capital Corp and LG&E International Inc v Argentine Republic, ICSID Case No ARB/02/1, Decision of the Arbitral Tribunal on Objections to Jurisdiction, 30 April

2004, Decision on Liability, 3 October 2006 despite the fact that the government’s “necessity defense” in CMS relied on the same economic crisis 267

In the case of Lanco v Argentina, the Tribunal determined that an 18.3% shareholding qualifies as sufficient investment for jurisdiction purposes The ruling emphasized that the Treaty does not mandate an investor to possess control over a company's administration or hold a majority share to be recognized as an investor under its terms.

267 Watson, Farley and Williams, “Investment Treaty Update.” Winter 2006

 The BIT between Canada and Venezuela

 The BIT between Denmark and Indonesia

 The BIT between Germany and Guyana

 The BIT between Germany and Israel

 The BIT between Germany and Sri Lanka

 The BIT between Japan and Egypt

 The BIT between Netherlands and Argentina

 The BIT between the U.S and Argentina

 The BIT between the U.S and Australia

 The BIT between the U.S and Azerbaijan

 The BIT between the UK and USSR (now UK - Russia)

 The General Assembly Resolution 1803 (XVII) of December 14,1962

 Universal Declaration of Human Rights

 Baker, James C., Foreign Direct Investment in Less Developed Countries: The Role of ICSID and MIGA Westport, Connecticut: Quorum Book,

 Bernardo M Cremades, Promoting and protecting international investments, International Arbitration Law Review (2000)

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 Gregoire, Christine, The Honorable Rob Portman (2005)

 Joy Cherian, Investment Contracts and Arbitration – The World Bank Convention On the Settlement of Investment Dispute, A.W Sijthoff International Publishing Company B.V

In her work "Privatizing Human Rights: The Interface Between International Investment Protection and Human Rights," Ursula Kriebaum explores the complex relationship between international investment law and human rights The article is featured in the compilation "The Law of International Relations," edited by August Reinisch and Ursula Kriebaum, which honors Hanspeter Neuhold Kriebaum highlights the challenges and implications of integrating human rights considerations into the framework of international investment protection, emphasizing the need for a balanced approach that respects both economic interests and fundamental human rights.

 Kumarian, Confronting Globalization: Economic Integration and Popular Resistance in Mexico., Bloomfield (2003)

 Lucy Reed, Jan Paulson and Nigel Blackaby, Guide to ICSID Arbitration, Kluwer Law International (2004)

 Peter Muchlinski, Multinational Enterprises and the Law (1999)

 Redfern and Hunter, Law and Practice of International Commercial Arbitration, Sweet and Maxwell (2004)

 Rudolf Dolzer and Christoph Schreuer, Principle of International Investment Law, Oxford University Press, New York, (2008)

 International Bank for Reconstruction and Development, Report of the Executive Directors on the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (18 March 1965), in

 International Centre for Settlement of Investment Dispute, ICSID Annual Report (2007)

 Katia Yannaca, Working Papers On International Investment, Improving The System Of Investor-State Dispute Settlement: An Overview, OECD, (February 2006)

 Peter D Cameron, Stabilisation in Investment Contracts and Changes of Rules in Host Countries: Tools for Oil & Gas Investors, Association of International Petroleum Negotiators (AIPN), Final Report (5 July 2006)

 Ryan Suda, The Effect of Bilateral Investment Treaties on Human Rights Enforcement and Realization 2 (NYU Global Law Working Paper No 01,

 U.N Economic and Social Council [ECOSOC], Sub-Comm on the Promotion of Human Rights, Report of the High Commissioner for Human Rights, Human Rights, Trade and Investment, (July 2, 2003)

 UNCITAD, Investor-State Disputes Arising From Investment Treaties: A Review, UNCTAD Series On International Investment Policies For Development (2005)

 UNCITAD, Latest development in Investor – State Dispute Settlement, IIA Monitor No.1 (2008), United Nations, Geneva (2008)

 UNCTAD, World Investment Report 2006: FDI from Developing Countries and transition economies: implications for development, New York and Geneva (2006)

 World Bank, Global Development Finance, Washington, DC: World Bank

 “Azurix wins claim against Argentina, recoups portion of its sunk costs.” International Institute for Sustainable Development Investment Treaty News (ITN), (July 26, 2006)

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 A Broches, The Convention on the Settlement of Investment Disputes between States and Nationals of Other States of 1965: Explanatory Notes and Survey of its Application, 28 Yearbook of Commercial Arbitration

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 Arif Hyder Ali, Alexandre de Gramont, ICSID Arbitration in the Americas, The Arbitration Review of The Americas (2008)

 Aron Broches, Selected essays: World Bank, ICSID and other subjects of public and private international law, Journal of International Banking Law, Publication Review (1996)

 Bejarano González, Fernando, “Investment, Sovereignty, and the Environment: The Metalclad Case and NAFTA’s Chapter 11,” in Timothy A.Wise, Hilda Salazar and Laura Carlsen, edits

 Bertrand Montembault, “The Stabilisation of State Contracts Using the Example of Oil Contracts – A Return of the Gods of Olympia”, RDAI/IBLJ (No.6, 2003), p.593

 Brunet, Edward, “The Core Values of Arbitration” Arbitration Law in America, Cambridge University Press (2005)

 C Chatterjee., “The Stabilisation Clause Myth in Investment Agreements”,

 Cabrera, Fernando, “Bolivia expounds on reasons for withdrawing from ICSID arbitration system”, Investment Treaty News, 27 May, International Institute for Sustainable Development (2007)

 Cabrera, Fernando and Luke Eric Peterson, “Argentina moves to disqualify tribunal in dispute over admitting earlier rulings”, Investment Treaty News, 9 May, International Institute for Sustainable Development, (IISD)

 Carlos E Alfaro, Argentina: ICSID Arbitration and BITs Challenged by the Argentine Government, December 21, 2004 – available online

 Carolyn B Lamm, Eckhard R Hellbeck, Chiara Giorgetti, The new frontier of investor-state arbitration: annulment of NAFTA awards, International Arbitration Law Review (2008)

 Chris Maina Peter, Selected essays: World Bank, ICSID and other subjects of public and private international law by Aron Broches, Journal of International Banking Law, Publication Review (1996)

 Damon Vis-Dunbar, Luke Eric Peterson and Fernando Cabrera Diaz,

“Bolivia notifies World Bank of withdrawal from ICSID, pursues BIT revisions”, International Institute for Sustainable Development, Investment Treaty News, (May 9, 2007)

 Eric Neumayer and Laura Spess , Do Bilateral Investment Treaties Increase Foreign Direct Investment to Developing Countries? World Development Vol 33, No 10, pp 1567–1585 (2005)

 Franck, Susan “The Legitimacy Crisis in Investment Treaty Arbitration: Privatizing International Law Through Inconsistent Decisions.” Fordham Law Review, (March 2005)

 G Verhoosel, “Foreign Direct Investment and Legal Constraints on Environmental Policies: Striking A Reasonable Balance Between Stability and Change”, 29 Law & Pol’y Int’l Bus (1998) 451

 Goh Chien Yen, The Sharp Edge of International Investment Agreements: Expropriation and Dispute Settlement, Third World Network

 Griffin, Peter, Farren, Ania, How Icsid can protect sovereign bondholders, International Financial Law Review (Sep 2005), Vol 24 Issue 9, p21-24

 Hakeem Seriki and Mark Beeley, State immunity and arbitration: Svenska Petroleum Exploration AB v Government of the Republic of Lithuania and

AB Geonafta, International Arbitration Law Review (2006)

 Hellmuth Fuhrer, “The Role of Private Foreign Investment in Economic Development, OECD Observer, Special Issue (September 1966)

 Jacob Katz Cogan, Bolivia's Denunciation of the ICSID Convention - The International Law Reporter (July 8, 2007)

 Julien Fouret, The World Bank and ICSID: Family or Incestuous Ties?, International Organisation Law Review (2007) 121-144

 Klaus Peter Berger, “Renegotiation and Adaptation of International Investment Contract: The Role of Contract Drafters and Arbitrators”, Vanderbilt Journal of Transnational Law (2003)

 Liebeskind, “State-Investor Dispute Settlement Clause in Swiss Bilateral Investment Treaties” (2002) 20 ASA Bulletin 1 at 2

 Lorenzo Cotula, Regulatory Takings, Stabilization Clauses And Sustainable Development, Global Forum on International Investment, OECD, (March 2008)

 Luke Eric Peterson, “Brazil remains wary of international investment rules”, Investment Law and Policy Weekly News Bulletin, 1 June, International Institute for Sustainable Development (IISD) (2003)

 Luke Eric Peterson, “Umbrella clause annulled in CMS-Argentina case, remainder upheld”, Investment Treaty News, (September 28, 2007)

 Luke Eric Peterson, ICC nixes Argentina’s bid to disqualify arbitrator in financial crisis case” Investment Treaty News, (January 12, 2006)

 Luke Eric Peterson, Investment Treaty News: 2006 – A Year in Review, International Institute for Sustainable Development (IISD) (2006)

 Luke Eric Peterson, Pakistan Attorney General advises states to scrutinize investment treaties carefully, Investment Treaty News, December 2006, The International Institute for Sustainable Development (IISD) (2006)

 M Kantor, “New Amendments to ICSID’s Arbitration Rules”, Stockholm International Arbitration Review 213 at 213 (2006)

 Mann, Howard, Konrad von Moltke, Aaron Cosbey, and Luke Eric Peterson “IISD Model International Agreement on Investment for Sustainable Development.” International Institute for Sustainable Development, (IISD) (2005)

 Margarita T.B Coale, “Stabilization Clauses in International Petroleum Transactions”, p.30 Denver J.Int’l L and Policy (2002)

 Mary Bottari and Lori Wallach, Nafta’s Threat To Sovereignty And Democracy: The Record of NAFTA Chapter 11 Investor-State Cases 1994-

2005, Lessons for the Central America Free Trade Agreement, Public Citizens Global Trade Watch (2005)

 Mary Hallward-Driemeier, Do Bilateral Investment Treaties Attract FDI? Only a bit…and they could bite, World Bank, DECRG, (June 2003)

 Miguel Solanes and Andrei Jouravlev, Revisiting privatization, foreign investment, international arbitration, and water, United Nations Publication, (November 2007) Chile

 Miller, Scott “United States Suspends Trade Negotiations with Ecuador, U.S Department of State.” International Information Programs, (May 17,

 Morton P, MAI Gets Tangled in Web: Foes to the Trade Deal Were Marshalled Worldwide, (October 1998) via the internet

 N Terki, “The Freezing of the Law Applicable to Long-Term International Contracts”, 6 Journal of Int’l Banking L (1991) 43

 Nick Gallus, Recent BIT decisions and composite acts straddling the date a treaty comes into force, International & Comparative Law Quarterly

 Ole Kristian Fauchald, The Legal Reasoning of ICSID Tribunals – An Empirical Analysis, European Journal of International Law, Oxford Journals, 19:301-364 (2008)

 P.Comeaux and N Kinsella, “Reducing Political Risks in Developing Countries: Bilateral Investment Treaties, Stabilisation Clauses, and MIGA

& OPIC Investment Insurance”, 15 N.Y.U.Sch.J.Int’l & Comp.L (1994)

In the arbitration case between Metalclad Corporation and the United Mexican States, filed under Chapter 11 of NAFTA, the Petitioner outlines key arguments presented to the Supreme Court of British Columbia on January 22, 2001 This case, recorded as ICSID Additional Facility Case Number ARB(AF)/97/1, highlights significant legal considerations regarding investment disputes under international trade agreements.

 Pippa Read, International Investment in the WTO: Prospects and Challenges in the Shadow of the MAI, (1999) 11 BOND LR

 Roberto Daủino, ICSID – A Forum for the Resolution of International Legal Disputes Through Arbitration and Conciliation, (November 16,

 Rudolf Dolzer, The Impact of International Investment Treaties on Domestic Administrative Law, International Law And Politics, Vol 37:953

In their work, "Challenging Corporate Investor Rule," Sarah Anderson and Sara Grusky examine how the World Bank’s Investment Court, free trade agreements, and bilateral investment treaties have empowered corporations, leading to a significant shift in corporate influence They highlight the implications of this new era of corporate power and propose strategies to counterbalance its effects, advocating for reforms that prioritize public interest over corporate interests Their analysis underscores the urgent need for a reevaluation of existing policies to protect communities and the environment from unchecked corporate dominance.

 The National Law Journal, International Law: The wrong kind of

 Todd Weiler, Balancing Human Rights and Investor Protection: A New Approach for a Different Legal Order, 27 B.C INT’L & COMP L REV

 Vandevelde, K (2000), The Economics of Bilateral Investment Treaties, Harvard International Law Journal, 41 (2), 469-502

 “Ecuador rejects IMF recommendation in Occidental Petroleum suit” International Herald Tribune, Americas (October 7, 2006)

 “The Gambia.” Africa Research Bulletin, January 1, 2001

 Bridges, Tyler “Country in Crisis,” Houston Chronicle, July 6, 2005

 ICSID News Release dated December 5, 2007, “Ecuador’s Notification under Article 25(4) of the Convention”

 ICSID News Release Dated May 16, 2007, “Bolivia Submits a Notice under Article 71 of the ICSID Convention”

 Investment Arbitration Reporter, Volume 1, No.2, Jun 3, 2008

 Investment Arbitration Reporter, Volume 1, No.3, June 18, 2008

 Investment Arbitration Reporter, Volume 1, No.4, July 1, 2008

 Investment Treaty News (ITN), February 5, 2008

 Investment Treaty News, (ITN) February 5, 2008,

 ITA Monthly Report published by Kluwer Law International

 Latest development in Investor – State Dispute Settlement, IIA Monitor No.4 (2006), UCTAD, United Nations, New York and Geneva (2006)

 Manson, Paul “Evo Morales; Padlocked in the Palace.” BBC News, (April 5, 2006)

 Schneyer, Josh “Amid mixed signals, Bolivia’s new president offers some comfort to foreign firms.” Platts Oilgram News, (January 24, 2006)

 The Arbitration Review of The Americas (2008)

 The National Law Journal, International Law: The wrong kind of

 Bolivian Government Guidelines for a Fair Trade and Cooperation Treaty with the US, available online

 Business-to-Business Mediation/Arbitration vs Litigation, National Arbitration Forum, (January 2005)

 American Chamber of Commerce in Vietnam, Roundtable on VN-US Bilateral Investment Treaty with U.S.Chamber, (September 2008)

 Bokhari, Ashfak, “Pitfalls in signing BIT with US

 Bolivia’s letter to ICSID Dated (June 21, 2007) available online

 Dow Jones, Interview: Argentina seeks diplomatic exit from ICSID suits, Bilaterals.org (October 12, 2007)

 Elkins, Z., Guzman, A & Simmons, B (2004) Competing for Capital: The diffusion of bilateral investment treaties, 1960-2000 Working paper - University of Illinois, University of California at Berkeley and Harvard University

 National Association of Counties letter to USTR Mar 21, 2002, on file with Public Citizen

 Opening remarks by Roberto Danino Secretary General, ICSID, “Making the most of international agreements: a common agenda” Paris, (December 12, 2005)

 Panel of ICSID arbitrators list

 UNCTAD, Series on issues in international investment agreements, Scope and Definition (1999)

 Watson, Farley and Williams, “Investment Treaty Update” (Winter 2006)

 World Trade Organisation, “Trade and Investment: Negotiate or continue to study?” Briefing note, the Third WTO Ministerial Conference, (December 1999)

 ADF Group Inc v United States of America, ICSID Case No ARB(AF)/00/1, Final Award, 9 January 2003 (NAFTA)

 Aguas del Tunari S.A v Republic of Bolivia, ICSID Case No ARB/02/3

 Alex Genin, Eastern Credit Limited v Republic of Estonia, ICSID Case

No ARB/99/2, Award, 25 June 2001 (United States-Estonia BIT)

 Autopista Concesionada de Venezuela v Bolivarian Republic of Venezuela, ICSID Case No ARB/00/5, Decision on Jurisdiction, 27 September 2001, and Final Award, 27 September 2003

 Azurix Corp v Argentine Republic, Award, ICSID Case No ARB/01/1, 14 July 2006

 Bayview Irrigation District et al v Mexico, ICSID Case No ARB(AF)/05/1 (NAFTA ) Award, 19 June 2007

 Československa obchodní banka, a.s v Slovak Republic, ICSID Case No ARB/97/4

 CME Czech Republic B.V v Czech Republic (2003) – search case No

 Continental Casualty Company v Argentine Republic, ICSID Case No ARB/03/09, award dated September 5, 2008

 European Court of Human Rights - López Ostra v Spain - 16798/90

 Fedax N.V v Republic of Venezuela, ICSID Case No ARB/96/3, Decision on Objections to Jurisdiction (11 July 1997), 5 ICSID Reports 183 (2002)

 Fireman's Fund Insurance Company v United Mexican States, ICSID Case No ARB (AF)/02/1 (NAFTA)

 Generation Ukraine INC v Ukraine, ICSID Case No.ARB/00/9, Award 16 September 2003

 CMS Gas Transmission Company and the Argentine Republic, ICSID Case

 Lanco International v Argentine Republic, ICSID Case No.ARB 97/6

In the case of LG&E Energy Corp., LG&E Capital Corp., and LG&E International Inc v Argentine Republic (ICSID Case No ARB/02/1), the Arbitral Tribunal issued a significant ruling on jurisdiction on April 30, 2004, followed by a decision on liability on October 3, 2006 This landmark case highlights the legal complexities surrounding international investment disputes and the obligations of host states under bilateral investment treaties.

 Marvin Roy Feldmen Karpa v United Mexican States, ICSID Case No.ARB (AF)/99/1)

 MCI Power Group LC and New Turbine, Inc v Republic of Ecuador, ICSID Case No ARB/03/6, Award, 31 July 2007

 Metalclad Corp v the United Mexican States, ICSID Case No.ARB (AF)/97/2, Award (August 30, 2000)

 Salini Costuttori S.p.A and Italstrade S.p.A v Kingdom of Morocco, ICSID case No ARB/004, Decision on Jurisdiction (23 July 2001)

 SGS Soci´et´e G´en´erale de Surveillance S.A v Pakistan, Dec on Objections to Jurisdiction, 18 ICSID Review 307 ICSID (2003)

 SGS Société Générale de Surveillance S.A v Republic of the Philippines, ICSID Case No ARB/02/6

 Suez, Sociedad General de Aguas de Barcelona, S.A (AGBAR) and Vivendi Universal, S.A v Argentine Republic - ICSID Case No ARB/03/19

 T´ecnicas Medioambientales TECMED S.A v Mexico, 43 I.L.M 133, 122 ICSID (World Bank) 2003

 Tecnicas Medioambientales Tecmed S.A v United Mexican States, ICSID Case No ARB(AF)/00/2, Award, 29 May 2003 (Spain/Mexico BIT),

 Vieira v Chile, ICSID Case No ARB/04/7 (Chile – Spain BIT)

 www.art-us.org/bolivia_guidelines